Mon 09 Nov
Last Wednesday The New York Yankees beat the Philadelphia Phillies to win their twenty-seventh World Series. After a nine year title drought, the victory predictably thrilled Yankees fans like myself while also re-igniting the old complaint that the franchise is a bully in the baseball market, that the team uses an obscenely resourceful payroll to effectively and unfairly buy championships.
Actually, the pilot light for that particular criticism never goes out, whether the team has won or lost its most recent bid for the World Series (or even when they make no post-season appearance at all, as happened in 2008). For almost a decade, the Yankees have consistently maintained the highest payroll in Major League Baseball while failing to bring home a World Series title, and during that time the grousing took the form of ridicule. What Yankees fans heard then was: “See? You Yankees can’t buy championships, even with all of your money.” What we hear today is: “See? You Yankees just buy championships with all of your money.”
This is not a coherent line of argument, but then again it would be naïve to look for any motivation here other than envy, because the logic at work is so suspect. It’s pretty safe to say that a good number of those who hate the Yankees because of their payroll are unabashed capitalists, too; they’d be very unlikely to begrudge the fact that the highest valued, best performing organization in any given market also led that market. That’s not just capitalism, it’s the way capitalism is practiced in America.
I’ve always thought, too, that vilifying the Yankees payroll was a perspective that lacked dimension. Yes, it’s a consistently stratospheric number, but isn’t it significant, too, that by making their home in New York the Yankees are at the epicenter of the biggest baseball market on the planet? The team franchise has a payroll that’s commensurate with its huge valuation, if nothing else.
However, as a counter-argument, declaring the team a victim of its own incredibly lucrative circumstances seems equally one-dimensional. So I wondered recently if it might also be true that the Yankees are not just big spenders, but big investors, as well. Anecdotally at least, I knew that their single-minded dedication to winning championships year after year no matter the cost stands in contrast to the perpetual inefficiencies I’ve heard about at other clubs, where owners routinely pocket revenues from the so-called “luxury tax” that they receive from free-spending teams like the Yankees, rather than re-investing the money in talent.
So I dug around a bit online and compiled some figures, dumped them into Excel and found that, relative to the value of their franchise, the Yankees actually invest a fairly high percentage of their revenues directly in their payroll. Of the US$375 million in revenue that the club generated in 2008, in 2009 they dedicated US$201 million of it to talent, making for a 54% investment rate. That ranks them fourth amongst all major league teams.
That says at least something, I think, about the fact that the Yankees aren’t just rife with cash, but that they have the wherewithal to put their money to work, too. As the dominant team in such a large market, they could easily invest at a much lower rate, pocketing significantly more cash while still outspending their competition.
Their 54% investment rate certainly compares favorably with their division rivals, the Boston Red Sox, who invested just 45% of their revenues in talent, ranking them right in the middle of the pack — the average investment across all ball clubs is in fact exactly 45%.
While this investment rate may suggest that the Yankees have not just money but dedication, it doesn’t necessarily follow that the team spends that money wisely. In fact, there are some teams who invest a similarly high percentage of revenues in their talent and have little to show for it.
The New York Mets and the Chicago Cubs, for example, both rank higher than the Yankees on this scale, and yet their dedication produced thoroughly miserable results this season. What’s more, the Colorado Rockies, the Los Angeles Dodgers, the Minnesota Twins and the St. Louis Cardinals all managed to make it to the fall playoffs while spending even smaller percentages of their revenue on talent than the average. In the case of the Twins, their paltry 41% investment rate was still able to overcome the MLB-leading 62% investment rate of the Detroit Tigers; in a dramatic one-game playoff at the very end of the season, the Twins knocked out the Tigers and prevented them from advancing to the post-season altogether.
If anything, these results may prove only that payroll doesn’t matter, that just as neither large nor small payrolls can guarantee a team a post-season berth, so too is it true that a team’s investment rate has no bearing on its path to the playoffs.
On the other hand, there’s the post-season. As is true with the post-season in general, the numbers tell a very different story once all of the teams are whittled down to just eight contenders for the crown. At least in the 2009 play-offs, looking exclusively at those clubs that advanced shows a very close correlation between a team’s investment rate and how well it did in the last weeks of the season.
Ranking those eight teams by their investment rate mirrors very closely the results of the race: four of the five teams with the lowest investment rates — all below the 45% average — were eliminated in the first round; the fifth team, the Dodgers, was dispatched easily in the second round. All of the teams with higher investment rates gave their opponents a run for their money, at least, even if none of the series came to a seven-game head. It’s also worth noting that the Phillies, in spite of carrying a payroll of almost less than half of the Yankees’, nearly matched them in their investment rate and came reasonably close to being world champions. Now that says a lot.
Of course, an amateur analysis of one year’s worth of data is too small a sample size to suggest that this simple calculation can be a reliable predictor of a team’s performance. As a belated disclaimer, I should also add that I’m really, really bad at math.
Still, I won’t be shy about suggesting one lesson: it matters how much a club is willing to put on the line to win a championship or achieve a goal, especially in the post-season. What made the difference with this year’s Yankees club was not really how much money it commanded, but rather how far the organization was willing to go to win once the prize was within grasp — further than twenty-six other teams, at least.
Admittedly, having the fattest wallet on the block is a fact that can’t be ignored, but it would seem to me to be less important and less of an advantage than most critics contend. What’s more, it occurs to me that what we want is more teams investing like the Yankees, not less. If the criticism is that the Yankees are too rich, even those who hate the team can’t really be arguing that the team should spend less on talent and take home more money, could they? There’s just no logic to that.
For my part, I’m now more convinced than ever that it’s a hollow statement to say that the Yankees simply bought their twenty-seventh world championship. As with everything in life, while it matters how much you have, what’s more important is how you use it.